Good day, and welcome to the Full House Resorts Inc. first quarter 2014 earnings conference call. Today’s conference is being recorded. At this time, I would like to turn the call over to Dan Foley of ICR. You may begin.

Thank you, operator, and good morning. By now, everyone should have access to our earnings announcement and Form 10-K, which was filed with the SEC. These may also be found at our website, www.fullhouseresorts.com, under the Investor Relations section. Before we begin our formal remarks, I would like to remind everyone that part of our discussion today may include forward-looking statements. These statements are not guarantees of future performance, and therefore undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact the future operating results and financial condition of Full House Resorts. I would now like to introduce Andre Hilliou, Chairman, Chairman and Chief Executive Officer of Full House Resorts.

Thank you, Dan. With me today on the call are Mark Miller, our chief operating officer, and Deborah Pierce, our chief financial officer, who will assist me in reviewing our first quarter results. As we discussed on our last call, the first quarter was tracking to be a very tough quarter, specifically due to a very harsh region of weather in both the Midwest and the Gulf Coast. As many of you are aware, regional gaming trends have been soft for some time, and coupled with one of the worst winters in the last several decades, we too felt the impact. Patrons did not visit the facilities in the usual numbers, and the typical snowbird traffic we see on the Gulf Coast never materialized. The trends worsened in the heart of the first quarter, January and February. We are, of course, not the only company to have been affected by this very tough weather, and while we don’t traditionally look to blame the weather for our woes, we know that we had a harsh impact in the first quarter. Indeed, we had expected to see some improvement in our operations as we enter a period of better weather. However, in Indiana, new competition has simply not grown the market and as a consequence, all existing operations in the market are suffering. On the Gulf Coast, the weather started to improve just as the traditional busy season ended, around Easter. In fact, we believe that we have reached a critical saturation point with casino facilities in the Ohio/Indiana market, given the lack of growth. In addition, our core casino customer, age 55 or older, continues to be very conservative with their spending, and we, along with many of our competitors, are feeling a dual pinch. As with all tough operating environments,…

Thank you, Andre. Deborah and I will briefly review our first quarter 2014 financial performance and financial condition. I will be discussing operations and financial results at our properties, and Deborah will follow up with our consolidated financial results and financial position. The Silver Slipper Casino generated $2.1 million in EBITDA in the quarter, compared to $2.8 million last year. The weather during January and February 2014 was atrocious, and we had unusually icy conditions throughout the Gulf Coast during the quarter. The extreme weather continued throughout the quarter and the usual balmy weather conditions, which attract snowbirds, did not materialize until very late in March. As the weather has slowly improved, so have revenues, but unfortunately, most of the first quarter was negatively impacted, and local consumer spending has been depressed, as they have been recovering from the poor weather, government sequestration and shutdowns, and general weak economic conditions along the Gulf Coast. With the weak revenue environment, we moved aggressively to control costs. Total operating costs at the Silver Slipper declined by $600,000 during the quarter, as the management team worked hard to mitigate the lower volumes we experienced. We estimate that the weather accounted for approximately $600,000 of the reduction in EBITDA during the quarter. The Rising Star Casino Resort generated $600,000 in EBITDA in the quarter, compared to $2.7 million of EBITDA last year. Our property continued to feel the effects of the same extreme weather conditions as previously mentioned, as well as increased competition in our Ohio markets and zero market growth. Market growth significantly underperformed expectations through the first quarter, and the severe weather in January and February resulted in effectively no market growth at all, despite having two new competitors in our competitive set. All of these factors negatively impacted our revenue, which…

Thank you, Mark. For the first quarter 2014, the company recorded a net operating loss of $100,000, compared to an operating income of $3.1 million in the prior year quarter. This decline of $3.2 million is the result of the aforementioned tough operating environment at both Rising Star and Silver Slipper, as previously described by Mark. For the three months ended March 31, 2014, total revenue was $30.4 million, a 22% decrease from the prior year period, primarily due, again, to the aforementioned economic, promotional, competitive, and weather-related issues. Operating expenses of $30.5 million in the first quarter of 2014 were down 15% or $5.5 million from the prior year quarter, due to the decline in business volume, but also largely due to strong cost containment initiatives put in place to deal with the challenging operating environment. For the first quarter, we believe that EBITDA was negatively affected by the previously discussed unusual weather conditions at our Indiana and Mississippi operations by an estimated $2 million. For the quarter, we incurred $1.5 million in interest expense compared to $1.9 million in the prior year quarter. The decrease was primarily related to our reduction in overall debt to $59.5 million at March 31, 2014, from $68.8 million at the end of March 2013. Interest expense in the first quarter of 2014 consisted of cash interest expense of approximately $1.1 million and amortization of debt costs of approximately $400,000. For the first quarter of 2014, we generated a tax benefit of $526,000. Our book income tax expense can vary substantially from the 35% federal statutory rate because of the state income taxes and also large permanent differences between book and tax. Our taxable loss for the first quarter was $1.6 million. In March 2014, we received $2 million in a net operating…

Thank you, Deborah. There is no question we are facing some of the toughest headwinds we have ever faced. And while the operating environment remains challenging, we continue to be focused on providing the best service to our customers in this difficult operating environment. I think it’s important to take a step back for a moment to understand what we have accomplished. We have successfully transformed Full House from a management company into a regional operator of high-quality assets. In addition, we have many exciting growth opportunities on the horizon. A new hotel tower at Rising Star gives us an important tool fight in the increasingly competitive environment there. In addition, much-needed tax relief is helping us to improve our operating efficiency. We have great confidence that our soon to be completed hotel tower at Silver Slipper will be a very strong addition to the property. And finally, we believe the opportunity in Kentucky is absolutely tremendous. Looking at the demographics and the lack of gaming options around our proposed sites, we believe Kentucky provides us with great future growth potential. The operating environment is tough, but Full House is comprised of long-tenured professionals in the gaming industry, with significant experience. This is a challenge our team is ready to meet head on, and I can assure you that Full House will emerge a better company because of it. Thank you, and we’ll now open it up for questions.

[Operator instructions.] We’ll go to our first question, from Justin Sebastiano with Brean Capital.

How much did the covenant waiver cost you guys?

We did pay a waiver fee to our second lienholder of $50,000. We didn’t have to pay anything to our first lienholder.

Based on a big comeback in EBITDA, it looks like that’s probably going to happen again for the June quarter? Do you anticipate being able to get a waiver again?

We’re currently in negotiations with our lenders, and we feel confident that we’re going to be able to work out a revision to the covenant.

You mentioned the consumer spending. It hasn’t got really that much better at your properties, considering your core demographic is still kind of being conservative, but did the weakness come from that unrated or lower end of the player database, or is that affecting basically all of your players?

I would say that it’s affecting us across the board, especially in Mississippi, where we saw a whole segment of the market just wasn’t there because of the bad weather. I think the upper end of the market is performing better from a demographic perspective, but as you know, that’s not a huge part of our business, so I think it’s both on rated and on the lower end of the player database.

And I know it’s pretty early on, it’s only been about two weeks, but how does Belterra Park impact the results at Rising Star in May?

It’s too early to tell, really, Justin. When a new property opens, it has an impact on us, but I think to understand the impact of a property takes more than two weeks to really be able to provide accurate information.

And we see April data out of Indiana, everybody, Hollywood, Belterra, and Rising Star all down 20% plus. When do you think this sizable decline starts to get less?

I think the issue for us, if you look at March and April’s results for the market as we measure it, which would be our part of Ohio and Indiana, there’s been no growth in the market for the last two months. And I think that is what really has everybody, including us, scratching our heads. I think it’s going to continue to be a very tough row to hoe until we see some growth in the market. I think at this stage, we’ve anniversaried Hollywood in Cincinnati, and obviously Miami Valley, we’re just getting into it. But if the market continues to not grow, I think it’s going to be a tough row for a little while. And at this point, we’re very, very focused on managing our cost structure and continuing to look for ways to market to the customers who have been loyal to this property, and have demonstrated a propensity to come here.

And as far as Silver Slipper, I know you said the snowbirds are already coming back, but it was post the busy season. Is it kind of getting back to normal there as far as what you would expect this time around?

It is. I think we missed most of the snowbird season, which really kind of starts to end around Easter. But I think for this time of year, the property is performing close to prior year levels, close to expectations. It’s still weak. When you look at market growth there, it’s certainly not improving very much, but we are seeing results improve to some degree. I talked about the Grand Lodge already, so…

And then Buffalo Thunder, you guys aren’t going to renew that. How do you plan to replace the EBITDA that you generate from that property?

We are looking at management contracts in Kentucky, and we are looking at growth in Kentucky, and I think that growth in Kentucky could come in sections, some in 2015 and with ownership, god willing, in 2015 or 2016 and beyond. And of course, that’s still speculation at this stage. And at the end of the day, we are always looking at new management contracts, and people call us, and we are always on the market looking. If we think it’s a good fit for us, then we will pursue it. If we don’t think it’s a good fit for us, we don’t go forward. So we are always looking at those management contracts all over the U.S., and you know we have a good reputation in that environment as well.

You mentioned Kentucky. I know we’re still waiting to hear from the judge there. When do you think we know something definitive there, where you guys and Keeneland actually move forward with building an instant racing facility at Keeneland grounds.

We can’t really speak on behalf of Keeneland, so that question, I will pass. Because we are going to be the managers, and they are going to be the owners, so I just don’t want to speak on behalf of our partner.

But we do know that the judge is obligated to make a ruling within 180 days, which we’re already well into that 180 days, so we expect that sometime this summer, at the latest, the judge will make his ruling on the last remaining issue.

And the case has been remanded to the judge, who has approved, in the past, instant racing. So it’s not like it’s a brand new judge.

And the 180 day clock started in late February?

Accurate, yes.

And then just lastly, on the Fitz, the trailing 12 month EBITDA you guys stated at December was $10.1 million. What is it through March 31?

We really can’t speculate on what it is. We just can’t talk about it. We were provided that information in confidence.

When do you expect to hear, if at all, from the seller whether or not you’re going to get this thing terminated early?

Soon, hopefully.

We’re currently in discussions with them. I think we’ll have it resolved in the relative near term.

And the 90-day period to obtain financing ends on what date? Is that June 20, somewhere around there?

Yes, late June.

We’ll take our next question from David Bain with Sterne Agee.

I have kind of a bigger picture question on the potential termination of the acquisition and how that changes your positioning to pursue future acquisitions. I guess I would assume a candidate would review this and potentially be more hesitant to get locked up into due diligence or a financing period. Or should we just assume that this was very proactive on your end, given your share price and volume, and something you think forward candidates will understand? Is this something that we should look to in our forward outlook for acquisitions?

I think this acquisition, we just ran into a period where there were just too many headwinds. I think the weakness in the regional gaming markets, the bad weather, and some other issues that we’re not at liberty to discuss, just caused there to be too many headwinds for us to be able to finance this transaction the way that we wanted to finance it. And I think that we’re going to focus on Kentucky here for the next immediate term. We think it’s the biggest opportunity available to the company. We’re going to continue to look for acquisitions, and I think that as the dust settles on this bad weather period, and hopefully we see some improvement in regional gaming markets and the related financial performance, not just Full House Resorts but the gaming industry in total, then I think we’ll be able to go back and look at financing markets again, freshly. But I think that at least for the very immediate term, we’re going to focus on Kentucky, we’re going to focus on our existing operations and getting them squared away in this environment, and then we will look for opportunities to move forward.

And then if Kentucky does happen in the near term, and you laid out the capex schedule, I understand the management agreement doesn’t require any capex, but the 75% purchase of Thunder Ridge and move to Corbin, that would likely require some new funding, and if so, is that just like project debt issuance and equity out of cash on hand? Or is there some strategy there?

I think your analysis is exactly right. I think that we are going to have to put some capital to work in the predevelopment stage of the Corbin opportunity, Thunder Ridge opportunity. The exact amount of that has not yet been determined. It’s something that Andre alluded to we were continuing to work with Keeneland to determine the best way to move forward there. But until we know exactly what the nut is, and what’s required, I think it’s premature for us to discuss exactly how we’re going to fund it at this point. But we are going to need to allocate some capital, and that will obviously either have to come off of our balance sheet or we’ll have to raise it in one form or another.

There are no questions in the queue at this time. I would like to turn the call back to Andre Hilliou.

We’d like to thank everyone for being with us today. With that, we will end the call and wish all of you a great rest of the week.